Chapter 11, Problem 5PS

Summary Introduction

Adequate Information:

Co-worker has informed that he has beaten the market for each of the last three years.

To construct:

Whether I believe in efficient markets based on the information provided by my co-worker.

Introduction:

Efficient market hypothesis (EMH)

defines that the stock prices reflect fair market value incorporating all the relevant available information in market. As per EMH hypothesis, to earn higher profits an investor must invest in riskier assets that have high stock beta.